11.

SHARE BASED COMPENSATION

December

31,

2016,

the Company had

four

share-based employee compensation plans, including

three

incentive share-base plans and the Company’s Employee Stock Purchase Plan. The Company measures the fair value of share-based awards, if and when granted, based on the Black-Scholes method and using the closing market price of the Company’s common stock on the date of grant. Awards vest over periods ranging from

one

three

years and expire within

years of issuance. Share-based compensation expense related to time-based awards is amortized in accordance with applicable vesting periods using the straight-line method. The Company vests performance-based awards only when the performance metrics are likely to be achieved and the associated awards are therefore likely to vest. Performance-based share awards that are likely to vest are also expensed on a straight-line basis over the vesting period but

may

vest on a retroactive basis or be reversed, depending on when it is determined that they are likely to vest, or in the case of a reversal when they are later determined to be unlikely to vest.

Share-based compensation expense of

$901

and

$1,446

was recognized for the fiscal years ended

December

31,

2016

and

January

2016,

respectively.

Share based compensation for the fiscal year ended

December

2016

did not include any expense associated with performance-based awards since they were, as of

December

2016,

determined to be unlikely to vest.

As of

December

31,

2016,

the Company had approximately

$0.6

million

of total unrecognized compensation cost related to all time-based non-vested share-based awards granted under the Company’s various share-based plans, which the Company expects to recognize over fiscal

2017.

These amounts do not include a) performance-based restricted share units, b) the cost of any additional share-based awards that

may

be granted in future periods or c) the impact of any potential changes in the Company’s forfeiture rate.

During fiscal

2016,

the Company’s Compensation Committee of the Board of Directors adopted a Long Term Incentive Plan (“LTIP”) for certain executives. The LTIP is anticipated to issue restricted share units each fiscal year that are contingent upon achieving certain performance metrics as defined by the Compensation Committee over a

three

fiscal year performance period. The Company issued

200,000

such performance-based restricted share units in fiscal

2016.

As of

December

31,

2016,

these performance-based restricted share units were deemed unlikely to vest and therefore no expense has been recognized.

Incentive Share-Based Plans

2000

Employee Stock Incentive Plan (the

2000

Plan)

The

2000

Plan, approved by the Company’s stockholders in

April

2001,

provides for the issuance of up to

1,500,000

shares of the Company’s common stock to officers and key employees of the Company and its subsidiaries or to consultants and advisors utilized by the Company. The Compensation Committee of the Board of Directors could award incentive stock options or non-qualified stock options, as well as stock appreciation rights, and determined the vesting period at the time of grant. As of

December

31,

2016,

options to purchase

25,000

shares of common stock granted under the

2000

Plan were outstanding.

2007

Omnibus Equity Compensation Plan (the

2007

Plan)

The

2007

Plan, approved by the Company’s stockholders in

June

2007,

provides for the issuance of up to

700,000

shares of the Company’s common stock to officers, non-employee directors, employees of the Company and its subsidiaries or consultants and advisors utilized by the Company. No more than

350,000

shares of common stock in the aggregate could be issued pursuant to grants of stock awards, stock units, performance shares and other stock-based awards. No more than

300,000

shares of common stock with respect to awards could be granted to any individual during any fiscal year. The Compensation Committee of the Board of Directors determined the vesting period at the time of grant. As of

December

31,

2016,

options to purchase

17,000

shares of common stock granted under the

2007

Plan were outstanding.

The

2000

Plan and

2007

Plan are expired and therefore

additional shares are available for awards thereunder.

2014

Omnibus Equity Compensation Plan (the

2014

Plan)

The

2014

Plan, approved by the Company’s stockholders in

December

2014,

provides for the issuance of up to

625,000

shares of the Company’s common stock to officers, non-employee directors, employees of the Company and its subsidiaries or consultants and advisors utilized by the Company. The Compensation Committee of the Board of Directors determines the vesting period at the time of grant.

In fiscal

2016,

the Company amended the

2014

Plan with shareholder approval to increase the aggregate number of shares of stock reserved for issuance under the Plan by an additional

500,000

shares so that the total number of shares of stock reserved for issuance under the Plan shall be

1,125,000

shares and to extend the expiration date of the Plan to

December

2026.

As of

December

31,

2016,

under the

2014

Plan,

197,734

time-based and

200,000

performance-based restricted share units were outstanding and

619,266

shares were available for awards thereunder.

Employee Stock Purchase Plan

The Company implemented the

2001

Employee Stock Purchase Plan (the “Purchase Plan”) with shareholder approval, effective

January

2001.

Under the Purchase Plan, employees meeting certain specific employment qualifications are eligible to participate and can purchase shares of common stock semi-annually through payroll deductions at the lower of

85%

of the fair market value of the stock at the commencement or end of the offering period. The purchase plan permits eligible employees to purchase shares of common stock through payroll deductions for up to

10%

of qualified compensation, subject to maximum purchases in any

one

fiscal year of

3,000

shares.

In fiscal

2015,

the Company amended the Purchase Plan with shareholder approval to increase the aggregate number of shares of stock reserved for issuance or transfer under the Plan by an additional

300,000

shares so that the total number of shares of stock reserved for issuance or transfer under the Plan shall be

1,100,000

shares and to extend the expiration date of the Plan to

December

31,

2025.

During the fiscal years ended

December

31,

2016

and

January

2016,

there were

81,225

and

73,048

shares issued under the Purchase Plan for net proceeds of

$368

and

$373,

respectively. As of

December

31,

2016,

there were

268,211

shares available for issuance under the Purchase Plan. Compensation expense, representing the discount to the quoted market price, for the Purchase Plan for the fiscal years ended

December

31,

2016

and

January

2016

was

$108

and

$111,

respectively.

Stock Option Awards

Transactions related to all stock options under all plans are as follows:

	All Stock Options Outstanding
	Shares			Weighted Average Exercise Price
Options outstanding as of January 3, 2015		53,000		$	7.65
Options granted		-
Options exercised, net		(3,500	)	$	4.30
Options forfeited/cancelled		(5,000	)	$	5.78

Options outstanding as of January 2, 2016		44,500		$	8.12

Options exercisable as of January 2, 2016		29,500		$	9.15

Intrinsic value of outstanding stock options as of January 2, 2016	$	0

Intrinsic value of stock options exercised in fiscal year ended January 2, 2016	$	8

Weighted average grant date fair value of stock options issued during fiscal year ended January 2, 2016		N/A

Options outstanding as of January 2, 2016		44,500		$	8.12
Options granted		-
Options exercised, net		(2,500	)	$	5.62
Options forfeited/cancelled		-

Options outstanding as of December 31, 2016		42,000		$	8.27

Options exercisable as of December 31, 2016		27,000		$	9.47

Intrinsic value of outstanding stock options as of December 31, 2016	$	6

Intrinsic value of stock options exercised in fiscal year ended December 31, 2016	$	3

Weighted average grant date fair value of stock options issued during fiscal year ended December 31, 2016		N/A

A summary of the status of our nonvested stock options outstanding as of

December

31,

2016,

and changes during the year then ended is presented as follows:

Nonvested Stock Options	Shares		Weighted-Average Grant-Date Fair Value
Nonvested at January 2, 2016		15,000	$	2.33
Vested		-
Forfeited		-
Issued nonvested		-
Nonvested at December 31, 2016		15,000	$	2.33

The following table summarizes information about stock options outstanding at

December

31,

2016:

Range of Exercise Prices				Number of Outstanding Options				Weighted-Average Remaining Contractual Life				Weighted-Average Exercise Price
				Outstanding		Vested		Outstanding		Vested		Outstanding		Vested
	$5.27	-	$6.10		17,000		2,000		6.62		1.02	$	6.00	$	5.27
		$9.81			25,000		25,000		0.55		0.55	$	9.81	$	9.81
					42,000		27,000

Restricted share units

The Company granted

262,734

and

48,000

restricted share units during the fiscal years ended

December

31,

2016

and

January

2016,

respectively. The restricted share units granted in fiscal

2016

comprised of

62,734

time-based awards and

200,000

performance-based awards.

The Company estimates that it will recognize expenses for all unvested share-based awards outstanding as of

December

31,

2016

as follows:

Fiscal Year		Time- Based				Performance- Based				Total
2017		$	578			$	-			$	578

The above estimates are based on certain assumptions that are subject to change and that the actual expense recognized

may

materially differ from above. The above estimates do not include:

any future grants of restricted share units, either time-based awards or performance-based awards, or

any currently outstanding performance-based awards that as of

December

31,

2016

were deemed unlikely to vest but

may

later be deemed likely to vest.

The risk-free rate of return is based on the yield of U.S. Treasury Strips with terms equal to the expected life of the grants as of the grant date. The expected term of grant is based on historical stock option exercise experience. The Company used its historical stock price volatility to compute the expected stock price volatility. The expected dividend yield is based on the Company’s fiscal

2016

dividend rate. The Company, at this time, has no plans to issue any future dividends. The annual forfeiture rate is based on the Company’s historical experience. The Black-Scholes option weighted average assumptions used in the valuation of share based awards for the fiscal years ended

December

31,

2016

and

January

2016

were as follows:

	Fiscal Years Ended
	December 31, 2016			January 2, 2016
Weighted average risk-free interest rate		1.35	%		1.74	%
Expected term of option (years)		5			5
Expected stock price volatility		33	%		35	%
Expected dividend yield		0.00	%		0.00	%
Annual forfeiture rate		3.11	%		3.23	%
Weighted-average grant date fair value	$	5.51		$	5.00

During fiscal

2016,

the Company issued

262,734

restricted share units,

62,734

time-based and

200,000

performance-based. Of the

62,734

time-based restricted share units,

37,734

were issued to the Company’s Board of Directors as part of their annual compensation program and

25,000

were issued to the Company’s executives as part of their fiscal

2015

compensation plan. During fiscal

2015,

the Company issued

48,000

restricted share units, all of which were issued to the Board of Directors as part of their annual compensation program and vest at the end of fiscal

2016.

All of these restricted share units include dividend accrual equivalents, which means that any dividends paid by the Company after issuance but before vesting of the restricted share unit become due and payable after the vesting period assuming the grantee’s restricted share unit fully vests. Dividends for these grants are accrued on the dividend payment dates and included in accounts payable and accrued expenses on the accompanying consolidated balance sheet. Dividends for restricted share units that ultimately do not vest are forfeited. As of

December

31,

2016,

the Company has

397,734

restricted share units outstanding, all of which include dividend equivalent rights. Total dividends accrued and payable upon vesting on all restricted share units as of

December

31,

2016

and

January

2016

equals

$0.4

million and

$0.5

million, respectively.

	Number of Restricted Stock Units (in thousands)			Weighted Average Grant Date Fair Value per Share
Outstanding non-vested at January 3, 2015		500		$	6.61
Granted		48		$	5.00
Vested		(334	)	$	6.05
Forfeited or expired		(5	)	$	7.95
Outstanding non-vested at January 2, 2016		209		$	7.10
Granted – time-based vesting		63		$	5.98
Granted – performance-based vesting		200		$	5.36
Vested		(74	)	$	5.56
Forfeited or expired		-			-
Outstanding non-vested at December 31, 2016		398		$	6.34

Based on the closing price of the Company’s common stock of

$6.36

per share on

December

30,

2016,

the intrinsic value of the non-vested time-based restricted share units at

December

31,

2016

was

$1.3

million. This amount does not include any intrinsic value that

may

be associated with the performance-based restricted share units that are deemed unlikely to vest.